Now that the smoke has cleared in Vatican City – both figuratively and literally – and the Catholic Church has new leadership, one of the many issues facing Pope Francis is the pressure being exerted on the Vatican to clean up its bank.

Steeped in decades of secrecy, the Vatican Bank has been under mounting pressure in recent years to clean up its act or face global financial instability.

On the one side are those seeking greater transparency, on the other are those seeking to preserve status quo and continue to operate under a blanket of secrecy.

The Vatican Bank and America’s banks have much in common – both have lost their way and now efforts are underway in Italy and in the U.S. to reign them in and clean them up.

The Vatican Bank was created in the 1940’s and was seen as a way to get money to Eastern Bloc countries to bring an end to Communism. Today, it’s said that the bank helps the Vatican operate in places such as Cuba. A noble beginning to be sure, but in recent years there have been allegations of money laundering and the disappearance of millions.

European agencies that monitor financial institutions are pushing for change much like lawmakers in the U.S.

The Mighty Elephant: Banks Representing the Too Large to Fail, Too Large To Jail – Oppenheim LawBlog Theory.

U.S. Attorney Eric Holder, the man charged with upholding the laws of this country, has finally recognized the elephant in the room.

During a Senate Judiciary Committee meeting this week, Holder finally admitted what the rest of us have been saying for a long time: There are banks in America that are too big to fail!

Ironically, American Banker, the very same publication read by those Holder criticized, was among the first to report the news.

Said Holder: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy.”

Sadly, he offers no solutions to what has become an epidemic of fraud that led to one of the worst economic crisis in our country. By allowing banks to perpetrate fraud by selling mortgage securities they knew were not worth the paper they were written on, the Justice Department, in a way can be considered just as guilty for failing to hold banks to the fire.

It’s like the courts saying a murderer can’t be prosecuted because he is 6’9”, weighs 400 pounds and is too big to jail. Holder’s argument is simply not defensible.Continue reading→

No one is suggesting that prosecuting Goldman Sachs would have been a walk in the park. But prosecuting them was necessary, if the climate of Wall Street is ever going to change.

What is absolutely maddening about all this is that by allowing Goldman Sachs to skate, the DOJ is all but announcing that the banks can continue to engage in other unconscionable and illegal activities without the fear of retribution This is called a moral hazard — encouraging certain negative behavior by allowing it to continue.

“Ironically” — we only hear about moral hazard in the media, it’s FROM the banks, or governmentofficials like Edward DeMarco, who are alarmed at the notion that homeowners might participate in moral hazard. They will use that alarmist notion, despite the fact that it has yet to be substantiated, as a reason not to do principal write-downs or provide homeowners the meaningful assistance they need.Continue reading→

In the days that followed, his new field general Eric Schneiderman was unveiled and almost immediately action was taken.

When Schneiderman issued subpoenas, just days after the President appointed him to run his new Residential Mortgage-Backed Securities Working Group, I thought that perhaps, FINALLY, a corner had been turned.

But it’s becoming clear to me now that the train that is the RMBS Working Group hasn’t left the station, and depending on who you believe, there may not even me a station built yet!

After those few weeks of full-court press by Schneiderman, there hadn’t been a peep about the status of the Working Group’s investigation. Yes it may have only been three months, yet I fear that the bold vision you and I were sold might turn out to be just another empty promise.